Top 10 Hospitality Industry Trends in 2015

The 2014 was a success year not only for me but also for the whole hospitality industry. Almost all big hotel chains experienced growth in bottom line and number of new openings. However, what are the perspectives and trends for the next year? I chose a summary written by Bob Rauch who is an experienced hotelier who is now running hotel management company – R. A. Rauch & Associates, Inc. I was personally interested in him because he used to be general manager of some of the Hilton’s hotels. I will try to expand his insight of 2015 by other professionals’ opinions.

The TOP 10 Trends by Bob Rauch:

1. Milennials – are becoming the fastest growing customer segment within the hospitality industry. They are not marginal group but represents 32% of all US customers and soon (by 2025) they will become majority. I’ve already spent some time exploring this new group of customers but just to remind, there are couple of things that make them so special: “Exploration, interaction and experience are the major focus of Millennials who are willing to pay more for a greater experience.”. Author also ephasizes that millenials stress the importance of design more than any other group. The second characteristics of milennials is their affection for technology. They especially use mobile internet to arrange rooms/tables on their way. thirdly, they are willing to speak up for their rights, using millenials’ media like facebook or tripadvisor.

My comment: I can’t disagree with anything that Bob has indicated. Although, from my site I would point future difficulties that hotels will face because of Milennials. Firstly, like during cold war Russia and US pursue the army race of who has better technology and “more bombs”, hotels will pursue similar technology race. This year Hilton and Starwood introduced mobile app that let customer check-in on their phones and even choose preferable room (visible analogy to what airlines did few years ago), what left competitors behind. However, I am pretty sure that other big chains are not wasting their times and also develop new technological solutions to attract young customers. The second thing I wanted to point is their attitude towards complaints. As Bob said, they have no problem with speaking up although what is important to mention is that they don’t do it officially. The milennials generation is more introverted in real life situations. As a result, even if they are not satisfied with service, they would rather write the negative comment online than point this problem to staff. This creates a real difficulty for hotels as they will recognize problem way after the customer’s stay and it doesn’t give chance to repair the trust during the stay.

2. Customer Service – customer service in hotel industry is heading in two directions. Firstly into enabling customers to be more self-sufficient by technological support (the rise of digital travelers require hotels to provide mobile websites, apps that would satisfy their needs). Secondly, while the competition is growing the service hotel offer must be excellent (which is also connected with the ease of spreading complaints). Only by offering amazing, unexpected experience hotels can guarantee that the customers will return. Moreover, hotels have to be very flexible to customers needs, especially for groups needs that have high purchase power. Those two directions were quote by author as “high tech, high touch” and I believe they fairly describe nowadays customer service.

My comment: I would like to focus here on two issues. Firstly, the correlation between average/bad service and effect of online negative review. Even 10 years before, customer have limited access to experience of other customers. Usually the reviews had traveled by grapevine and had limited coverage. Therefore, customer could only assess the value of hotel by how it looked (usually on pictures).

3. Expectations of more international visitors – as we know China has become the biggest economy in the world and as we can predict it will have huge influence on travel industry. The new wave of new customers will experience US, where Mr. Obama introduced new VISA program for Chinese tourists, which already accounted to 80 millions. What is even more important those customers are spending on average over $1000 per day excluding accommodation. Author shows also another interesting fact, that out of 618 millions Chinese that have access to internet, 80% access it on their mobile devices.

My comment: Especially the last fact will create new opportunities but also threads for hotel industry. Hotels will need to focus on creating new ways of targeting customers using digital technologies.

4.Booking more profitable business – Almost whole industry experience growth in occupancy levels and revenue; what should indicate on bright future. However, we cannot forget that together with higher revenue goes higher cost. It is especially alarming as growth of cost is sometimes higher than growth in revenue, due to distribution costs and operating costs. Therefore hotels should find ways of decreasing those costs. There is especially emphasize on decreasing cooperation with online travel agencies. Fortunately, every year there are new players on OTAs market, what increase competition and enable you to negotiate you commission. The second phase is to encourage guest to book rooms on direct pages on their repeat visit.

My comment: Here I would like to present couple of ideas how to increase the probability of repeating business.

5. Innovative technology – Technological aspect has been mentioned in all points above, what gives an idea how important it is. But. author mentioned interesting mobile app (1App) that sends guests deals to do everything related to eating, playing or shopping. This is a new way to create engagement with customers.

6. The sharing economy – is amazing innovation that in my opinion created a huge thread/competition for traditional way of seeing accommodation. Airbnb is getting more and more customers and accommodation providers every year even if the thread of delegalizing it is becoming more serious (like it was made in SanFrancisco).

My comment: I believe that hotels should treat shared economy as their direct rival but rather as new segment with different types of customers.

7. Political uncertainty – here the author emphasize situation in US and Obama’s decisions on industry, however, I would like to point other interesting areas in the world where political uncertainty is much more serious.

8. Reputation management – in hotel industry, where service is hard to evaluate reputation is very important. However, it is not enough to track trip advisor or similar web site. There are new ways to make use of social media such as twitter or facebook. Interesting solution is created by Revinate (www.revinate.com) which takes huge advantage of all information included in social media to generate new revenue streams. However, bookings made via social media are still very marginal (due to PhoCusWright’s 45% surveyed companies received less than 1% of bookings via this channel).

my comment: I believe that we slightly overestimate the power of social media (excluding dedicated travel websites like tripadvisor). Conclusively, the facebook is big with it’s 1.38 billion active users and 4.75 billion pieces of content shared every day. However, it’s used for leisure purpose rather than informative. Therefore travel advertising on facebook is ineffective. But, the numbers shows something different. due to WebTrends in Jan2011 adv in travel costed only 0.36$ per click with also high click through rate.

10. Health and Wellness – trends will grow and will become bigger influence in decision making process also in hospitality. The author shows the example of Marriott O’Hare which started a cooperation with local food start-up to place healthy food vending machines in the property. Even if this action had positive feedback, the best selling item in this property is still burger.

my comment: This shows that even if the trend is growing it is still marginalized by more expensive and more crappy food. Real healthy lifestyle is rather niche market and it will take years (If it stays with existing pace) before it will become industry standard.

9. Real Time Marketing – as the role of traditional marketing in travel industry is still still significant, hotels have to include real-time marketing (as in social media) in their marketing mix. Depending on the targeted customers it’s importance might be higher or lower but cannot be underestimated.nother interesting solution for real time marketing that was mentioned by author is flip.to engage relation between hotel and customer even before arrival and let them share their experience with their friends and family what may lead to repeat bookings.

my comment: I need to agree that proper video campaign on facebook/youtube is likely to become viral and and “break the internet”. A good example outside of the industry would be Volvo commercial with Van Damme that was watched by 77M people and it is truly amazing if we take into consideration that it is commercial of a truck?! Well Done Volvo, well done.